Could offset labor contract savings

BY SCOTT GUTIERREZ, SEATTLEPI.COM STAFF

Updated 8:14 pm, Thursday, April 21, 2011

Diesel prices could cost King County Metro Transit an extra $8 million this year if they remain high, which would offset savings from wage concessions in Metro's most recent labor contract.

Metro's bus fleet consumes about 12 million gallons of diesel per year. The agency budgeted $32 million for fuel in 2011 at an average price of $2.63 per gallon, but Metro currently is paying an average around $3.43, , General Manager Kevin Desmond said Thursday.

Every 10-cent increase, if it holds through the year, could cost an extra $1 million. "In terms of costs, it's a problem if it continues throughout the year. Spending could go up $5- to $8- million just on fuel alone," he said.

Metro already is struggling with annual deficits caused by a decline in sales tax revenue due to the recession. The agency has raised fares, eliminated 70 staff positions and cut bus service by 75,000 hours to plug a two-year, $215 million gap in the last two-year budget. But declining revenue means Metro still faces cutting 600,000 more bus service hours by 2015.

"We made major gains with concessions in the labor contract and that's a good thing, but this is bad. They begin to cancel each other out a little bit, and we were counting on labor savings to go a long way to help us preserve service," he said.

State lawmakers may send help this year by allowing King County temporary authority to set a local $20 vehicle licensing surcharge to support transit. It would generate about $25 million per year for two years to help preserve transit service while lawmakers explore how to fund transit with a more stable source than the sales tax, which is vulnerable in tough economic times.

This year's fuel increases feel worse than 2008 -- the last time prices skyrocketed -- because the economy was still hot three years ago and people were increasingly riding transit to avoid pain at the pump, Desmond said. Now, ridership is relatively flat after dipping at the onset of the recession because fewer people are working. Also, recent fare increases are affecting ridership, he said.

"I'd much rather be where we were three years ago and facing high prices but in three straight years of 7-percent ridership gains," Desmond said. "Now, we have this terrible situation where just as the economy is starting to improve, we've raised fares, costs keep rising, and we're looking at these huge deficits."

Metro's annual operating budget is about $550 million and assumes a small amount of money leftover that can be used for unexpected costs. Higher fuel prices can get worked into the cash flow to avoid the "crisis in the moment," but that still could result in a wider financial gap the following year, he said.

Sound Transit, which operates express commuter buses, also is feeling the pinch. Between January 2010 and January 2011, fuel prices escalated by 39 percent, costing the agency about $3.3 million more for diesel, spokesman Geoff Patrick said.